I have been totally guilty of this. But the first step is admitting the problem…right? 🙂
But at some point, all traders have done this. Chalk it up to human nature, the get-rich-quick-itch, or too much coffee.
I'm talking about taking trades that you have no business taking because you have not tested the system and don't have confidence in it.
Oh wait, there is supposed to be a system?
Yeah, you know the trades I mean. When you take these trades, you lose money and that makes you wonder: “Is Forex trading a waste of time?”
But on top of the money you are losing, these trades are costing you much more than you think.
By taking these trades, it means that you are taking time away from things that are way more important. You may not realize how much time a trade takes up or how important the other things you could be doing are.
But they are super important. Don't believe me?
I don't blame you. All I ask is that you keep an open mind when you read this…
Why Traders Waste Time “Trading”
Let's say that you take a trade in the EURUSD with a half-assed plan. You don't even get that crazy, you only risk 1%.
(Imagine if you risked 25%, like some beginning traders do)
Maybe you convince yourself that you have a plan because Greece will probably leave the Eurozone, so you will short the pair…or some shit. In reality, it's half-baked, at best.
But now you are checking that trade every couple of hours. You can't get your mind off the fact that you may make or lose money.
Even if you only have $5 at risk, your life can revolve around that trade, until you close it out.
Why do traders do this? I won't lie, it can be fun.
It also gives you something to do. Checking your phone breaks up the monotony of your job. It gives you one more reason to wake up early.
In other words, you have something to look forward to.
Since you don't have a plan, the outcome is also random. It's like the lottery, you never know what will happen. But just like the lottery, your chances of winning are very, very small.
On top of this, your behavior is actually costing you more than the few bucks that you think you have at risk on the trade.
Let's take a closer look…
You Have More Important Things to do
I'm sure that you have heard the fable of the two brothers who had to choose between getting $2 million now or a penny doubled every day for a month. Yeah, of course the penny wins.
If you are the brother who chose the penny option, you end up with something like $10 million at the end of the month and you look like freaking genius because you know how to use a calculator.
But the point of the story is that tiny, insignificant things can become huge things.
So if you are taking random-ass trades, you are not testing a solid trading method on a new currency pair. You are not spending time with your friends and family. You are not…fill in the blank.
…and those things add up.
If you spent your time testing a real trading method on a new currency pair, you would have another profitable trading method that you could add to your money-making arsenal, instead of playing the guessing game. Chances are also pretty good that you wouldn't stress out so much about that trade either, because you actually have a plan.
The next time you take a trade, you will be investing your time and money. So before you click that mouse to take a trade, think about the penny story I mentioned earlier and how seemingly minor things can add up to something huge.
When you aren't focusing on crap trades, you have more time to do other things. You can take your spouse out on a date. You can go out to a local Meetup event and make some new friends. You can cross things off your Heroic List.
…and these things add up.
If you have heard stories of people who wake up one day and wonder why they are fat, their marriage blows, they hate their job and their kids never talk to them…we all know the answer. It all started with the small daily choices that they made over the years.
At the time, each choice seemed insignificant:
- Skip date night…just this week.
- Skip your kid's soccer game…just this once.
- Skip looking for a better job…just for today.
Skip enough of those things and you are skipping out on your life. I'm not saying that all these things happen because of taking bad trades. But my point is that there are so many more important things that you could be doing instead of “trading.”
As a side note, that is why I love swing trading. It allows me to make trading fit my schedule…not the other way around.
Think About it
I'm serious, drop everything right now and think about this for 3 minutes. Imagine watching yourself trade. Like if you were watching the footage from a security camera by your computer.
What are you wasting your time on? Are you engrossed in a trade that really doesn't have a plan? What else could you be doing?
It's only 3 minutes, you can spare that. Yes, throw up a timer on your phone and really examine what you are doing when you trade.
…I'll wait right here for you…
…do it now.
Welcome back! What did you discover? If you found that you do waste a lot of time in the trading process, let's do something about it.
This is how you can maximize your trading time…
How to Make Trading Worthwhile
As my friend Walter Peters says, trading should be boring. That may not seem like much fun, but I hope that you aren't trading for entertainment…
I hope you are trading to make cash money.
If you have made it this far, then that is probably the case. So how do you prevent yourself from taking terrible trades?
In reality, I don't think that there is a way to completely eliminate them. We will all take bad trades from time-to-time. That's just human nature.
But the best way that I have found to keep random trading under control is to give yourself enough reasons not to do it.
Since you will be tempted to take bad trades, burn into your mind the things that you are giving up by taking bad trades.
- Imagine how disappointed your spouse is whenever you are too focused on trading.
- Picture yourself sitting at your trading desk, five years from now, still losing money.
- Think about how many opportunities you are missing out on because you don't have the money to do them.
Whatever triggers an emotional response from you to stop taking random trades and actually test your systems, before you risk any money. The trigger will be different things for different people, so find out what your trigger is.
Write it Down
Finally, write it down and post it somewhere that you will see it everyday. What you write is up to you, but if you need an idea, you can use this template:
I will only trade systems that I have tested and have confidence in because that gives me the freedom and income to travel and work in Europe.
Or it could be something like:
I want to make my wife the happiest woman in the world and only taking trades that are on my approved systems list gives me the time and income to deepen our relationship.
You get the idea. A couple notes on this:
- Be sure to make your statement positive. Focus on what you do want, not what you don't want. Positive attracts positive and the same for negative.
- Also word your statement as if it has already happened. This will plant the seed in your subconscious that you really do have the power to get this done. Because you do.
Before I end this post, I just want to clarify one thing. I'm not saying that you shouldn't spend time on learning to trade.
If you really want to become a great trader, you have to hone your craft. You must put in the time and get educated.
But I'm saying that taking trades that don't have a solid plan behind them is a waste of money and more importantly, your life. That is time that could be spent: learning, backtesting or updating your trading journal and more!
You have a limited amount of time on this planet. Let's make it count.
What do you do to prevent yourself from taking bad trades? Share your strategies in the comments below…